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Peck v. Peck

Court of Appeals of Arkansas, Division IV

September 21, 2016

ALISON ASHLEY PECK, as a QUALIFIED BENEFICIARY OF THE PECK FAMILY TRUST and THE PECK MARITAL TRUST, AND IN HER INDIVIDUAL CAPACITY APPELLANT
v.
HANNAH PECK a/k/a HANNAH FINLEY, INDIVIDUALLY, AND AS TRUSTEE OF THE PECK FAMILY TRUST U/D JUNE 15, 2001, AND AS TRUSTEE OF THE PECK MARITAL TRUST APPELLEE

         APPEAL FROM THE PULASKI COUNTY CIRCUIT COURT, SIXTH DIVISION [NO. 60CV-14-1883] HONORABLE TIMOTHY DAVIS FOX, JUDGE

          Eichenbaum Liles, P.A., by: James H. Penick III, for appellant.

          Richard F. Hatfield, P.A., by: Richard F. Hatfield, for appellee.

          PHILLIP F. WHITEAKER, Judge

         Alison Peck brings this appeal from the order of the Pulaski County Circuit Court dismissing her first amended complaint against appellee Hannah Peck Finley where she alleged that Finley breached her fiduciary duties to Alison under a family trust. We hold that the circuit court did not conduct a proper analysis of the motion to dismiss; therefore, we reverse and remand for further proceedings consistent with this opinion.

          I. Factual and Procedural History

         The current appeal is a part of a series of litigation over the Peck Family Trust and the Peck Marital Trust created by Robert Peck. Robert Peck was the father of Alison and the husband of Finley. He created the Peck Family Trust, a revocable trust, on May 8, 2001.[1] Robert created the trust for the purpose of providing for the support, education, maintenance, and preservation of the health of Finley during her lifetime. Robert was to be the trustee during his lifetime, with Finley named as trustee upon his death. Robert also created trust provisions for his children. Upon the death of Finley, the trust assets were to be divided among beneficiaries, including Alison. Robert Peck passed away in 2006 and was survived by Finley, Alison, and his other three children.[2]

         After Robert's death, issues arose concerning the assets of the trust. In particular, the ownership of a mobile by Alexander Calder known as "Autumn Leaves" ("the Calder") was questioned. The Calder was purchased by Robert's parents in the 1950s, and Robert had possession of the Calder after their deaths. Upon Robert's death, Finley assumed possession of the Calder. Finley maintained that she received the Calder under her husband's will.[3]Finley eventually sold the Calder for $3.3 million net after commissions. Finley deposited the proceeds into her own personal account and not the account of the trust. Finley also invested the proceeds, which resulted in some major losses.

         In May 2008, the first lawsuit in this series of litigation began. Finley filed a declaratory-judgment action (the 2008 action) to determine ownership of the Calder. Finley sued Alison and her three siblings, as well as her own children, as defendants.[4] Alison defended the 2008 action, taking the position that Finley did not own the Calder but that the Calder was instead owned by one of her siblings, Capi Peterson. Alison also filed a counterclaim asserting that Finley had breached her fiduciary duties to her and her siblings, that Finley was liable as trustee to them, and for an accounting. The 2008 action was dismissed without prejudice in October 2009.

         In October 2010, the second lawsuit in this series of litigation occurred (the 2010 action). Capi Peterson filed an action against Finley, as trustee.[5] Peterson alleged that she was the owner of the Calder as the recipient of an inter vivos gift, that Finley wrongfully sold it to a third party, and that Finley was liable to Peterson for its value. Peterson sought an accounting for the Peck Family Trust and damages for the sale of the Calder. Finley answered the complaint and counterclaimed for a declaratory judgment to determine that ownership of the Calder was in the Peck Family Trust and that Peterson had violated the terms of a share-cancellation provision of the trust. After a bench trial, the circuit court dismissed Peterson's complaint, finding that the Calder was an asset of the trust, that there was no evidence that Finley acted in bad faith or with reckless indifference with regard to her trust duties, and that Peterson had forfeited her interests in the trust through the share-cancellation provision and thus lacked standing to sue as a beneficiary of the trust.

         Peterson appealed, and we affirmed the circuit court. Peterson v. Peck, 2013 Ark.App. 666, 430 S.W.3d 797. In that case, we held that Peterson failed to prove the elements of an inter vivos gift. We also affirmed the court's determination that Peterson forfeited her interest in the trust because her amended complaint questioned Finley's actions as trustee without any evidence that Finley had acted in bad faith.

         In May 2014, the current lawsuit in this series of litigation began. Alison originally sued Finley seeking a declaratory judgment of Finley's duties as trustee and her own rights as a beneficiary to be kept promptly informed of all material information regarding administration of the trust. Alison also asserted that Finley was required to produce reports beginning in 2006 but failed to do so despite repeated requests, and that Finley acted in bad faith and with reckless disregard of Alison's rights and otherwise failed to administer the trust in good faith.

         Finley adamantly defended the cause of action. Finley responded initially to Alison's original complaint with a motion to dismiss seeking dismissal under two theories. First, she took the position that Alison was barred from asserting her claim by the savings statute. Essentially, she argued that Alison filed a counterclaim in the 2008 lawsuit, voluntarily nonsuited this claim, and failed to refile it within one year. As a result, she was precluded from doing so now by the savings statute. Second, she took the position that Alison's pleadings in the 2008 action asserting that Peterson owned the Calder and that Finley had breached her fiduciary duties triggered the share-cancellation provision of the trust, thus forfeiting her interest as a beneficiary and depriving Alison of standing. The circuit court denied the motion to dismiss without explanation.

         Finley next answered the complaint, denying that Alison was a qualified beneficiary of the trust or had standing to seek a declaratory judgment because of the prior 2008 action. She also filed a motion for summary judgment, asserting that Alison's interest in the trust had been forfeited because of the prior 2008 litigation. Finley later amended her motion for summary judgment, contending that the interests of Alison and her sister, Peterson, were so intertwined that they stood in privity with each other and therefore res judicata barred relitigation. The circuit court denied Finley's motion and amended motion for summary judgment by separate orders without explanation.

         After the denial of the summary-judgment motions, Alison amended her complaint, seeking a declaratory judgment and adding claims for conversion, breach of fiduciary duty, deceit, and unjust enrichment or the imposition of a constructive trust. She also sought an accounting and punitive damages. Finley responded with a motion to dismiss, arguing that Alison Peck was a contingent, rather ...


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